IDA Ireland warned the Government that competition for foreign direct investment was becoming “more intense and aggressive” than ever as Ireland grapples with its own infrastructure frailties.
In pre-budget discussions, the investment agency said the availability of energy and water as well as the shortage and cost of housing were creating challenges in attracting business.
It was also crucial that the Irish tax system was seen as “clear, transparent, and [providing] certainty for investors,” amid global reforms around taxation, the agency said.
“While we acknowledge that Ireland must comply with our international commitments, it is equally important that we remain both internationally compliant and competitive,” IDA management told the Department of Enterprise in a July letter ahead of discussions over Budget 2025.
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The IDA said there were issues around interest limitation rules and conditions on schemes to attract high-paid executives that were “unnecessarily complex” and making Ireland less attractive.
“Remember we are sending a signal as to who we are, and what we want,” agency officials wrote. The letter warned access to an appropriately qualified and cost-effective labour force was becoming increasingly important in the face of international competition.
The IDA said restrictions around the so-called Sarp scheme, which gives tax relief to highly paid executives in multinationals, were not helping.
“Sarp’s inability to accommodate the direct hire of new senior executives, without them first being located elsewhere within the [business] group, has cost Ireland the ability to create new key strategic activities in Ireland. Locations that can hire new senior staff directly, is likely the location where new teams, eg AI [artificial intelligence] teams, will be created,” it said.
The IDA again raised the rates of tax that apply in Ireland, saying a 50 per cent marginal rate was a challenge “in the context of both international competitiveness and cost of living issues.”
The investment agency also sought changes around research and development credits, new short term tax incentives for digital and green transition, and clarity around cross border hybrid working.
More broadly, the IDA said the Government needed to put a renewed focus on energy, water, and housing in Budget 2025.
On power and water supply, it said national investment was needed “to increase capacity, while not letting cost recovery make Ireland uncompetitive for FDI [foreign direct investment] projects.”
In terms of its own budget, the IDA said it was looking for an increase in funding of pay to €38 million to help fill 20 vacant posts.
The agency said it needed an increase in funds for grants to industry to improve “value proposition” when compared to competing countries.
A submission on budget requirements said: “In such an uncertain environment, it is critical that IDA continue to partner with clients on their growth agendas and support company transformation through supports for R&D [research and development], training and investment in sustainable business practices.
“Extra finance for buildings was also required, the IDA said, to address “regional market failure” and to encourage investment around the country. This would include completion of buildings in counties Galway, Cavan, and Sligo as well as commencement of projects in Letterkenny, Mullingar, Drogheda, and Castlebar.
Asked about the records, the IDA said they had nothing further to add.
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